Japan’s virus-hit economy ‘too weak’ for new PM’s reforms plans

Yoshihide Suga is planning a fiscal overhaul. (AP)
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Updated 17 September 2020

Japan’s virus-hit economy ‘too weak’ for new PM’s reforms plans

  • California-based PIMCO, a unit of German insurer Allianz, manages 12.84 trillion yen ($121.90 billion) in assets for Japanese clients

TOKYO: Japan’s new leader Yoshihide Suga will struggle to push through structural reforms as they would be too painful for an economy hit by the coronavirus crisis, said an executive of PIMCO, one of the world’s largest investment firms.

Tomoya Masanao, head of the Pacific Investment Management Co’s (PIMCO) Japan arm, also said the Bank of Japan’s ultra-loose monetary policy will allow the government to continue ramping up spending, but not without huge costs.

Since adopting in 2016 a policy capping borrowing costs, the BOJ’s policy is essentially financing public debt and is integrated into the government’s debt-management strategy, Masanao said.

“It’s impossible for the BOJ to make an independent decision on exiting ultra-easy policy. Any move toward an exit would need to take into account the impact on long-term interest rates and fiscal policy,” he said.

California-based PIMCO, a unit of German insurer Allianz , managed 12.84 trillion yen ($121.90 billion) in assets for Japanese clients as of June 2020.

Suga, who was elected as new prime minister on Wednesday, has vowed to break barriers that hamper competition and pursue reforms to revitalize the world’s third-largest economy.

If successful, Suga would provide the missing third arrow of his predecessor Shinzo Abe’s “Abenomics” policies that consisted of bold fiscal, monetary easing and structural reforms.

But Masanao said he was doubtful Suga can push through painful reforms, when there is little fiscal and monetary ammunition left to support an economy hit by COVID-19.

“Abenomics succeeded in boosting growth and jobs, which was why Abe stayed in power for so long. But he didn’t use the political capital to push through reforms,” Masanao said.

“Suga also has a structural reform agenda. But the point is you need to first reflate the economy to undertake real reforms, which are by nature deflationary at least in the short run.”

Japan deployed two huge spending packages, accompanied by monetary easing steps by the BOJ, to cushion the blow from the pandemic that pushed the economy into deep recession.

By successfully capping borrowing costs at zero, the BOJ will likely allow the government to keep spending massively without causing an unwelcome spike in inflation, Masanao said.

But maintaining huge fiscal and monetary support for too long could distort market pricing and hurt Japan’s productivity by hampering reallocation of resources to growth areas, he said.

“The unintended consequences of prolonged ultra-loose policy are huge, most notably by distorting asset prices,” Masanao said. “It’s eliminating the chance of proper market pricing.”


Apple to launch first online store in India next week

Updated 18 September 2020

Apple to launch first online store in India next week

  • The company at present uses third-party online and offline retailers to sell its products in the country
  • India has become a key focus of tech giants over the last few years

NEW DELHI: Apple announced Friday that it will launch its first online store in India next week, as it seeks to increase sales in one of the world’s fastest-growing smartphone markets.
The company at present uses third-party online and offline retailers to sell its products in the country.
Apple CEO Tim Cook said in a tweet that the company “can’t wait to connect with our customers and expand support in India.”
The Sept. 23 launch comes ahead of India’s major Hindu festival season beginning next month.
With a nearly 1.4 billion people, including millions of new Internet users every month, India has become a key focus of tech giants over the last few years.
In August, three contract manufacturers for Apple iPhones and South Korea’s Samsung applied for large-scale electronics manufacturing rights in India under a $6.5 billion incentive scheme announced by the government.
Apple assembles some smartphones at Foxconn and Wistron’s plants in two southern Indian states.